The next biggest beneficiaries of the artificial intelligence industry may be less obvious companies that are quietly adopting new technologies, according to Nancy Tengler, chief executive officer and chief investment officer at Laffer Tengler Investments. He says there is no. As the current bull market widens, tech stocks have relinquished some of the large lead they held over other sectors. Since the Nov. 5 election, the Russell 2000 index is up 5.4% and the S&P 500 index is up 5% over the same period. Currently, Mr. Tengler is primarily focused on investing in “old economy” companies that have pivoted to new technologies that benefit from AI. “Our theme has remained the same over the years, but we think we're still in the early stages. Our theme is old economy companies pivoting to new technology,” she told CNBC on Wednesday. said in an interview. “In the industrial space, it's going to be companies that have pivoted to what we think of as the Fourth Industrial Revolution, and suppliers of picks and shovels,” Tengler said, highlighting Walmart as a prime example. In previous earnings reports, the company cited generative AI and robotic purchasing technology to help catalog products and inventory shelves and reduce labor costs. The company has also used advances in technology to manage its supply chain more efficiently than competitors such as Target and Kohl's, the latter of which completely “missed the boat,” Tengler said. Analysts are unanimously bullish on Walmart, with 41 of the stock's 44 ratings rating it a “strong buy” or “buy,” according to LSEG data. Tengler also likes Home Depot, which finished last year up just 2% but has made a remarkable comeback, rising 22% in 2024. Like Walmart, Home Depot has been using AI and cloud computing to power its e-commerce business and better manage its supply chain. “These are companies that we look at in our portfolio because we think this market and this economy is similar to the 1990s, when productivity drove up stock prices. It was a led growth economy,” Tengler said. Wall Street is similarly bullish on Home Depot, with the majority of analyst ratings being either “strong buy” or “buy,” according to LSEG. Among industrial and consumer stocks, Tengler said he likes so-called companies that provide tools and services to the AI industry. Specific names she highlighted included Emerson Electric and data center construction company Quanta Services. Tengler also pointed to water treatment company Xylem as an attractive business because it has cooling solutions for data centers and embraces digitalization to solve water utility problems. The financial industry is another area Tengler has focused on where generative AI is being deployed to improve productivity, with one of the most interesting use cases being fraud detection. Investors have generally become more bullish on financials, especially since the election. President Trump's second term could revitalize the entire sector as onerous regulations could be reduced, which could lead to a resurgence of capital market activity. The S&P 500 financial sector rose more than 5% after the election. Investing in old economy companies that use AI has been a theme for Tengler for some time. Earlier this year, she said that “generative AI is in many ways a more compelling story than the internet” in terms of improving productivity.
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